In the matter of Azurra Pty Ltd trading as Lifestyle Homes Pty Ltd (in liq) [2009] NSWSC 657

New South Wales Supreme Court

CITATION : In the matter of Azurra Pty Ltd trading as Lifestyle Homes Pty Ltd (in liq) [2009] NSWSC 657

HEARING DATE(S) : 22 June 2009 JURISDICTION : Equity

JUDGMENT OF : Austin J

EX TEMPORE JUDGMENT DATE : 22 June 2009

DECISION : Leave to proceed granted

CATCHWORDS : CORPORATIONS - creditors' voluntary winding up - leave to proceed with or commence civil proceedings against a company in voluntary liquidation - appeal against decisions of Consumer, Trader and Tenancy Tribunal concerning dispute between plaintiffs/owners and builder now in liquidation - whether plaintiffs should be left to lodge proofs of debt - relevance to application for leave of liquidator's assignment to a third party of company's rights to subject-matter of Tribunal determinations

LEGISLATION CITED : Corporations Act 2001 (Cth), ss 500, 1321

CASES CITED : Hall v Poolman [2009] NSWCA 64; (2009) 71 ACSR 139

Ajay Chand (First Plaintiff) PARTIES : Shashi Chand (Second Plaintiff) Azurra Pty Ltd t/as Lifestyle Homes Pty Ltd (Defendant) Lifestyle Homes Pty Ltd (by leave)

FILE NUMBER(S) : SC 2245/09

J M Patel (Plaintiffs) COUNSEL : D Farrar (Defendant) M Painter (Lifestyle Homes Pty Ltd)

SOLICITORS : Rassan T Selliah & Associates (Plaintiffs) Farrar Lawyers (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

AUSTIN J

MONDAY 22 JUNE 2009

2245/09 IN THE MATTER OF AZURRA PTY LTD T/AS LIFESTYLE HOMES PTY LTD (IN LIQ) JUDGMENT (Ex tempore; revised 9 July 2009) 1 HIS HONOUR: The plaintiffs engaged the first defendant company, now known as Azurra ("the company"), to carry out some building works on the plaintiff's land in Bellavista in 2006. There were disputes between the parties and the plaintiffs claimed that the work was not carried out in a proper and workmanlike manner. 2 In June 2007, notices were served which led to termination of the building contract and subsequent disputes before the Consumer, Trader and Tenancy Tribunal. 3 There were two proceedings before the Tribunal. In matter No HB 07/42668 the company claimed about $180,000 from the plaintiffs, and in matter No HB 07/43165 the plaintiffs claimed about $290,000 against the company. I shall refer to those two Tribunal proceedings as the company's claim and the plaintiffs' claim for defective workmanship. 4 The Tribunal delivered judgment in both matters in June 2008. The Tribunal dismissed the plaintiff's claim for defective workmanship, and on the company's claim, it ordered the plaintiffs, jointly and severally, to pay the company an amount of about $125,000. 5 The plaintiffs filed an appeal in the Supreme Court, which was remitted to the District Court in matter No 30086 of 2008. There was some disputation before me as to the scope of the appeal. It appears to me that the original summons seeking leave to appeal constituted an appeal against the Tribunal decisions in both matters, but an amended summons was subsequently filed in the District Court which, on its face, appears to be confined to an appeal against the Tribunal's decision on the company's claim - the claim which led to an order for payment of about $125,000 as I have said. The plaintiffs indicated to this Court that they wish to appeal against the Tribunal's determinations on both matters. Presumably they will need to seek leave to amend in the District Court. 6 In January 2009, the company went into voluntary liquidation. The present proceedings are an application, by an amended originating process filed on 11 May 2009, for an order that the plaintiffs have leave to maintain and continue the appeal proceedings in the District Court. That order would be made under s 500(2) of the Corporations Act, which provides that after the passing of a resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. 7 I have proceeded on the basis that the proceedings No 30086/08 remitted to the District Court constitute a civil proceeding, which the plaintiffs wish to proceed with against the company. There are, as I have said, two components to the Tribunal's determinations. The plaintiffs seek leave to pursue their appeal to resist the obligation determined by the Tribunal that they should pay about $125,000 to the company. They also now foreshadow that they will seek leave to pursue their appeal against the Tribunal's determination of their defective workmanship claim. 8 My view is that s 500(2) applies to both limbs of the appeal. It seems to me that an appeal proceeding in a court, brought against a decision of a tribunal that money be paid to a company now in liquidation, is a proceeding against the company in liquidation requiring leave under s 500(2). As to the plaintiffs' claim for defective workmanship, generally the position is that where a plaintiff wishes to assert against a company in liquidation a claim for unliquidated damages, the appropriate course is for the plaintiff to lodge a proof of debt in the liquidation, rather than to pursue civil litigation. If the plaintiff is unhappy with the liquidator's decision concerning the proof of debt, then the plaintiff's recourse is to appeal against the liquidator's decision under the Corporations Act, s 1321. But here the plaintiffs' claim against the company in liquidation is not a claim for unliquidated damages, but rather a claim by way of appeal against a tribunal's decision to deny such damages. The adjudication of an appeal from a tribunal is not a matter readily amenable to determination by a liquidator (quite apart from the question of jurisdiction), and is more suitable to be dealt with by a court. 9 Here there are some additional considerations enhancing the case for leave. One consideration is that there are reasons of convenience in allowing the appeals by the plaintiffs against both aspects of the Tribunal's determinations to be decided together in the same court. 10 Another consideration arises out of the fact that the liquidator of the company has entered into a Deed of Assignment dated 23 February 2009 with the company now called Lifestyle Homes NSW Pty Ltd, which appeared, by leave, at the hearing of the application before me. There is some evidence that Lifestyle Homes is controlled by the builder who controlled Azurra before it went into liquidation, but it seems to me not relevant to any matter I have to decide to go further into that question. 11 The Deed of Assignment purports to assign to Lifestyle Homes all of the rights of Azurra in relation to the determination in favour of Azurra for about $125,000 in the Tribunal proceedings which are the subject of District Court appeal proceedings No 30086 of 2008. Having regard to the law's current attitude to the assignment by a liquidator of the right to litigate (see Hall v Poolman [2009] NSWCA 64; (2009) 71 ACSR 139, and the cases there cited), I can see no obvious reason why that Deed of Assignment would be found ineffective to vest in Lifestyle Homes not only its entitlement to the benefit of the Tribunal verdict in favour of the company for about $125,000, but also its entitlement to exercise such rights as the company could have exercised in respect of all aspects of proceedings No 30086 of 2008. That means that although the plaintiffs are not privy to the Deed of Assignment, the practical reality will be that any defence that is mounted in the District Court to their defective workmanship claim will be mounted in the company's name by Lifestyle Homes, and one can anticipate that Lifestyle Homes will seek to resist the plaintiffs' claim to set aside the Tribunal judgment for about $125,000 in favour of the Company, since it stands to benefit from that determination under the Deed of Assignment. 12 The attitude of the liquidator of the company is explained in Mr Parker's affidavit of 11 May 2009. He says that the company does not have the financial resources to defend the proceedings brought by the plaintiffs and has no interest in doing so, having regard to the Deed of Assignment. To the extent that the District Court proceedings are now, in reality if not in form, litigation not involving the interests of a company in liquidation, it seems to me there is no reason relating to the liquidation process for denying leave to proceed. 13 In those circumstances, it seems to me appropriate that the Court should grant leave under s 500(2) to permit the plaintiffs to proceed with respect to all aspects of proceedings No 30086 of 2008, including an appeal against the Tribunal's determination of the defective workmanship claim (if the District Court grants leave to amend so as to include that matter), as well as an appeal against the Tribunal's determination on the company's claim. 14 Presumably the company will need to remain a party to the proceedings, because the plaintiffs are not a party to the Deed of Assignment and there is no contractual privity between the plaintiffs and Lifestyle Homes. The plaintiffs' claims in respect of the Tribunal determinations are formally claims against the company. It will follow that if the plaintiffs succeed in mounting an appeal against the defective workmanship claim, any verdict will be a verdict against the company. It may be that the company will have no assets to meet that claim, but at least the position of the plaintiffs will be regularised and they will be able to lodge a proof of debt accordingly. 15 As to whether the company will have no assets, it appears that its assignment of the benefit of the Tribunal's determination in its favour was for consideration, and therefore there will be an asset in the company in liquidation constituting that consideration, whatever it might be. 16 I shall make an order under s 500(2) in terms of paragraph 1 of the amended originating process, except that the proceedings are to be designated No 30086 of 2008. 17 As to the question of costs, my view is that the correct course is to order that the plaintiffs pay the costs of the liquidator in the present proceedings, and that there be no order for costs in respect of the appearance today, by leave, on behalf of Lifestyle Homes. 18 It seems to me appropriate that an order for costs be made in favour of the liquidator having regard to some correspondence between the liquidator and the solicitors for the plaintiffs, which is in evidence before me. On 28 April 2009 the liquidator made his position clear, but in their undated reply, the solicitors for the plaintiffs appear to have misunderstood the position. The result has been that issues that might have been readily resolved by negotiation have been allowed to create difficulty and uncertainty that has made the present application more difficult to resolve than it ought to have been. 19 Moreover, the outcome of this application is that the plaintiffs are granted a form of dispensation, and normally an applicant for a dispensation is expected to pay the reasonable costs of those who respond to the application. 20 I therefore order that the plaintiff pay the costs of the liquidator of the first defendant as agreed or assessed. **********